It looks like a firesale in the world of cryptocurrencies with bitcoin breaking the
US$30,000 mark and ETH hovering around the US$2,000 level. But El Salvador, the world's
first country to make Bitcoin legal tender, has used the dip to add crypto to its coffers,
but is making Bitcoin legal tender actually furthering its adoption
in the new economy? Let's find out from Mark Lamb, Chief Executive Officer at CoinFlex,
a leading crypto derivatives exchange and yield platform. It's great to see you again, Mark.
Great to be here.
Mark, the countries that have adopted Bitcoin as legal tender have got a lot of criticism,
including from the IMF, which has said it could further financial instability.
Central African Republic, one of the poorest nations in the world,
has become the most recent one to bank on Bitcoin, but doesn't move like this
translate into crypto adoption. A report recently showed only 20% of El Salvadorans continue to use
the crypto wallet after spending the initial free bonus that was offered by the government.
The issue with using something like Bitcoin, BTC as a payment in these Latin American and
African countries is the fees. The fees on chain are often several dollars, often $5, $10
to spend bitcoin. If you're making a small amount of money, if you're making a few dollars a day, a
$1 fee is like a few hours, 5 hours of your time. You know, it's a lot of money, it's a high fee.
And so these fees end up pushing people to relatively centralized payment providers.
And the issue with that is you can't tap into the peer to peer liquidity. It makes it more
difficult to convert to cash. It just limits your options. The point of a blockchain is to
be able to be decentralized and be able to have people transacting peer to peer on it as cash.
And so I think this is where cheaper blockchains like Bitcoin cash and other things like that
would be a more, more suitable mechanism of payment for some of these poorer, impoverished
countries. I think there are a lot of reasons to move away from local currency. There was a
recent study that came out that said that majority of the world is living in double digit inflation
right now. What you'll see is a move towards towards crypto. But I think it's going to be
two things. I think it's going to be things like Bitcoin cash and other other currencies that have
very cheap transactional mechanisms. And I think it'll also be stablecoins because Stablecoins
tracked the value of the dollar. In the case of flexibility, you're also earning interest.
And so things like that are probably more likely to get adoption than than Bitcoin BTC because,
you know, the ability to transact first class on the network is very important.
We were also seeing a lot of innovative use cases emerge in Latin America. One
report says that one in five Argentines have used crypto. What's the driving factor here?
A lot of these countries don't have a very strong local currency, don't have
a very strong central bank. It comes down to inflation. You know, if you're an Argentine
and you've seen over the last hundred years, I don't know how many times, but it's been
it's been many, many times, probably more than almost any country in the world - the the entire
currency has just been completely wiped out to inflation. You don't trust local currency.
You probably don't even trust the dollar. But at the end of the day, they value things that are are
safe havens. But but but if you're if you're not rich, gold is hard to get in a in a way where you
can easily store it and you can easily do certain things with it. Bitcoin, crypto... This is the way
forward. This is where you can actually you can actually get a meaningful amount as a, as a small
individual and an everyday person and you can protect yourself. And so I think it's only natural
that anywhere that's dealing with double digit inflation, which again is the inverted world.
Interestingly, the governments in these countries seem to be pro-crypto unlike
the conservative wait and watch stance we've seen in the United States or the
European Union or even India. In fact, Buenos Aires is happy to accept crypto for making
tax payments. What explains the dichotomy in the different approaches at state level?
If you think about a country like El Salvador, El Salvador, Saint Kitts,
Central African Republic, many of these... Argentina, the citizens in Argentina, many
of these countries don't actually have a lot of ties to the US banking system or don't have very
privileged access in the US banking system and the US dollar financial system. And really their their
ultimately their citizens are looking for an escape and so a government. Can only not
listen to its citizens for so long. At the end of the day, it's at the behest of its citizens.
And so if all the citizens are saying, look, we want crypto, we want to escape from inflation,
we want all these things, you know, at some point the government has to listen. And I think also
in some cases the governments are getting some publicity and maybe people moving their
and other things from the crypto space. So crypto is is becoming a large economy
and it's it's not the biggest by far, but it's a it's a multi-trillion dollar market cap.
There's a huge amount of economic activity in the space that as that grows,
it becomes more of an incentive for more governments to be friendly to it.
It may not be big right now, but digital currencies are certainly
a giant in the making. Thank you as always, Mark.
Thank you for having me.